that's what he's been thinking about for a long time. >> david, thank you. >> thank you, lawrence. >> the gift that keeps on give. let's play "hardball." ♪ good evening. i'm chris matthews in los angeles. let me start tonight with this. we now know how mitt romney is without a script. the words that come into his head like that 47% stuff from may that got out in the campaign are just bad. the evidence is that this guy's default switch says blame the little guy, call him a mooch, a taker, a parasite, someone up for sale to any politician ready to pay. in fact, gifts, that's what the little person wants. the older person, the minority, cross their palm and they will pull the lever for you. cash and carry.

the smart conservatives know this is no way to treat a potential voter. a columnist i usually only agree with about movies put it this wa way in his new york post column today. romney didn't say that the election had come out as it did because obama's team had outplayed and outfoxed his. he should have because that's the truth. rather, he said that obama had won the second term essentially through bribery. well, look, i have three rules for both parties as they converge now to do their jobs. respect the voter, respect each other's offices, and search hard for common ground. those are what we should be doing, and that should be the way we're guiding our country's conversation today. not trashing the people who voted against you. but respecting the fact that they did for your own good. david corn is washington bureau chief for mother jones, and joy reid is managing editor of the grio. both are msnbc political analysts. look, let's take a look at some of the stuff from john mccain here. it's been four years since john mccain lost his presidential bid. just ten days since mitt romney

lost, but they still are both holding a grudge apparently against the president in their bitter comments this week. listen to romney's conference call about obama's gifts and mccain's complaints about obama ally u.n. ambassador susan rice. >> what the president's campaign did was focus on certain members of his base coalition, give them extraordinary financial gifts from the government, and then work very aggressive to turn them out to vote. >> susan rice should have known better, and if she didn't know better, she's not qualified. she should have known better. i will do everything in my power to block her from being the united states secretary of state. >> joy reid, let's go after romney first and the way he's calculating how he lost. now, you can give all kinds of reasons for losing and, fair enough, that's what you do in your head. but when you spout the argument that the other guy bought all the interest groups, all the categories of citizens and that's -- that seems to diminish not just the purchaser but the

purchase. you're basically saying these people were up for grabs, just buy them. you're never going to get them ever again if you talk about people that way it seems. >> exactly. and talking about more than half of the voting public as essentially bribery victims or being duped because they were given baubles by the administration, you know, it's ridiculous and insulting and precisely to some of the groups that republicans need to do better with. latino leaders were outraged by this, african-americans were outraged. they went after women, essentially everyone. what they're basically arguing is government is nothing more than a transaction of government giving you things in exchange for votes. it's an understanding of government that to me renders him unfit to be the leader of the united states government. if that's really what he thinks that government comes down to. because the things he was describing that the obama administration did, that is called governing. >> yeah. i think -- same question to you, david, why would he use words like this? i think it's the way he thinks unless he's being scripted. 47% was unscripted. this was unscripted. this could be the pure romney.

>> you know, chris, i was the first guy in the media to see the 47% remark. when i saw it, i couldn't believe it, but i thought maybe there was a slight chance that maybe he was saying it to play up to that crowd. he knew that's what they wanted to hear. but now when we hear how he talks about voters, he didn't just say, yes, they were bought off that, obama won their votes through bribery. he said i ran a campaign of big ideas, but these other people out there, they don't care about it. they're just in it for themselves, so they are the moochers, they are victims who are looking at who will pay them the most. in the end what happens, mitt romney portrays himself as a victim of the victims. it just confirms all the worst impressions from the 47% rant, and now you have republicans running away from him and basically saying, hey, don't let the car elevator door hit you on the way out. >> let me go to one thoughtful conservative. >> i mentioned before john, who i usually agree with on cultural issues, not ideological issues because he's a smart guy.

he writes for "the weekly standard." i always read the back of the book. i don't agree with the front of the book usually. it seems to me he had a good point in his column. he said romney's whole campaign was aimed at entrepreneurs, job creators, the titans of industry, the ayn rand type that see themselves that way, ignoring all the people that work for a living, work 50 or 45 or 40 hours a week, show up for work, do their jobs. most people are like that. he said if you limit your party simply to people who see themselves as titans of industry, you will have a very, very small notion of america and a small electorate working for you. >> exactly. basically, this was a candidate of the boss. and he left basically everyone else to the president, to barack obama, and i think if you're going to be the party of just the boss, you have to presume that, a, either everyone loves and adores their boss who is willing to vote for a guy who essentially boils down to nothing more than a ceo or you limit yourself to only the rich, to only people who, by the way, are not just wealthy, but who

actually, as david said, they feel like they're the victims in society. they're actually being put upon by the moochers, by everyone else who essentially isn't as good as they are, who doesn't deserve the things that they're getting from government. but what romney forgets is that some of the people who receive from government include his own base. you're talking about seniors who, you know, are probably the largest recipients of government, of government programs. and so he left off so many people and showed such disdain that it's no wonder he couldn't get a majority of votes. >> let's go through some of the people and what they have said about him now that they have discovered this guy. i think you're right, david, they should have known what they were dealing with long before the election returns came in, but people like to be with the winner, right, left, and center in that regard. as we've been saying this week, so now you tell us. more republicans are backing away from romney's gift language like new mexico governor susana martinez who said, quote, that unfortunately is what sets us back as a party, our comments that are not thought through carefully. or take marco rubio who told politico, i don't want to rebut him point by point.

i would just say to you, i don't believe that we have millions and millions of people in this country that don't want to work. i'm not saying that's what he said. i think we have millions of people in this country that are out of work and are dependent on the government because they can't find a job. that was carefully carved. and then there's chris christie, the governor of new jersey, who had this to say on "morning joe" just today. >> i voted for mitt romney, but the bottom line is we lost. and so now what we need to do as leaders of our party is pivot and get back to our jobs. and if we do our jobs well, people will put us back into office and if we don't, they won't. >> is it time for mitt romney to move on and stop having conference calls? >> that's up to him. i mean, listen, mitt romney is a friend of mine. i understand he is very upset about having lost the election and very disappointed. >> but it's not helpful, right? >> of course not, joe, but he's a good man and he will find his level, and i think it's still a little raw. so do i wish he hadn't said those things? of course not. but on the other hand, i'm not going to bury the guy for it.

>> you know, it's interesting, i want to go back to joy on this, this is just sheer human nature. i thought, and i like to think i'm fair about this, i thought that romney walked off the stage election night as a noble figure in politics. however the campaign had gone in some very bad directions, i believe he ended it in the right direction with nobility and graciousness and generosity, and i would use an old frank sinatra term, class. i thought he did it, came out alone, didn't bring his wife, didn't cry on anybody's shoulders, didn't surround himself with family. took the loss, said he had a good running mate, a great campaign team, and he was praying for the president. maybe that was shock. he was still, you know -- but a week or so later he's out there saying terrible -- not just terrible, we're all buying votes and selling votes, but making himself look like kind of a jester. >> yeah, sneering at the public that refused to take the opportunity to make him their president. that's not a way to go out. i think you're right, chris. i think a lot of times

politicians show who they really are and show their character in loss, in defeat, almost more than they do in victory. if you recall, you know, yes, we can, was a concession speech. that was the time when barack obama soared, when he lost to hillary clinton in new hampshire. sometimes you show who you are in loss. i agree with you. i thought the night he conceded, mitt romney, for having apparently done that in an hour, just gobbled it together, i thought did a good job. i thought if he remained silent or came across as a conciliatory figure, he might have a future. maybe not with the republican party because he really doesn't have a base. there are no romney republicans. >> i don't know what a romneyite is. >> he's of no use. >> we're finding out very quickly here that -- >> there aren't many of them. >> mitt romney is now the loneliest man in america. there's no one in the republican party with any loyalty to him. he didn't really represent any ideas -- >> because he wasn't one of the right wing -- the right wing didn't really trust him, the moderates gave up on him. everybody thought he was playing a charlatan act in their favor. republican be strategist and

haley barbour ally ed rogers told "the washington post" this. there's no romney wing in the party that he needs to address. he never developed an emotional foothold with the gop, so he can exit the stage anytime and no one will mourn. so i guess i want to address a question to joy here. you know, among minorities, among people that are perhaps generally democrats but, you know, for example the african-american community, you know the history as well as i do or maybe better, they were about 2 to 1 democrat going into the '60s. because of what jack kennedy did, wonderful call of consolation to mrs. king when her husband was in prison, what he did on civil rights with lyndon johnson, the community went about 99 to 1 pro-democrat, but it was only 2 to 1, you're only losing a third of a black vote if you're a republican. you're doing okay in big states. you're winning state governorships and senate seats. you start losing a community of the size of the african-american community, which is 10% to 15%, in big states, you're losing 80 percent net of that community. if you keep talking like romney is talking, you're going to keep losing it. i think it is about percentages.

you're not going to bring back the whole black community if you're a republican. if you can get a third of it, a third of the hispanic community, or as w. did, 40% of it, you change everything. >> when i look at the hispanic community, i see the african-american community in the '60s. you're right. the southern strategy broke the relationship, severed it, which had been a historic and long relationship between the african-americans and the republican party. i know elderly african-americans who stick with the republican party because of the history, but the southern strategy broke that. at the time in the 1960s before that happened, black people broke about the same percentage democrat to republican that latinos do now. think about the fact that in this election we went from about a 65% democratic hispanic electorate to 72%. if that trajectory continues 10, 15 years from now, latinos will be just where african-americans are, and that will make winning national elections extremely difficult for the republican party. >> don't forget about the youth vote. one of the things that mitt romney talked of as a gift was college loans for kids which --

>> he said they were being written off, and it's a complete lie. they're not being written off. you still have to pay student loans. >> he was wrong with the whole point of giving people a break on college or making it easier for them to go college. that's how we invest in our economy and we compete better with china, india and brazil. and he seemed totally lost on that point. >> don't forget the facts, he's wrong on that. nobody said you don't have to pay interest on student loans. >> but an attitude -- and if you lose the young vote and they end up voting for the dras two, three, four times in a row, that's going to put the republican party in a similar hole. >> not only that but the african-american community and latino community both read the signals, saw the voter i.d. stuff, the disdain that was shown for the ability of african-americans and latinos to vote. a lot of the voter i.d. stuff was directed squarely at latinos -- >> we're burying this guy. he's being lowered in the grave now. he's about 20 feet in the ground now. we keep shoveling the dirt on. one thing i want to stop here, if he only realized his kids

didn't need student loans and that makes him lucky, fortunate. that's not something -- you have to learn those things when you're rich. this is special. anyway, thank you joy reid. i got to go. thank you, david. you guys are great. please come back as fast as you can. coming up, the general on the hill. general david petraeus has probably got more ink than president obama and for all the wrong reasons. today he testified on what happened on benghazi. and whether ambassador susan rice had been given the fakes when she gave the administration's account. we're going to talk to a member of the house intelligence committee who was in that room when petraeus spoke in that closed door hearing. also, the fiscal cliff. how much room will the interest groups give the president to make a deal? they met with the president today and yesterday, and they told him where they stand. we'll hear from two of them who met with them. and guess who showed up at "parks and recreation" last night, on the show? >> on behalf of the president and myself -- >> oh, mr. vice president, i am deeply flattered, but there's no way i could take over madam secretary clinton's position. >> wow. vice president biden goes hollywood in the "sideshow." let me finish with this question, can obama's second

term be a true reach for greatness? this is "hardball," the place for politics.

republicans are becoming something of an endangered species in california. today republican congressman brian bilbray, who has been on the show, lost his bid for re-election in the san diego area. bilbray conceded the race to democrat scott peters in his state's newly drawn 52nd district. that was there. last night the associated press called the race in the 7th district not far from san francisco, there, longtime republican congressman and "hardball" guest dan lundgren is out. notre dame guy. that brings california's congressional delegation to only 15 republicans, 38 democrats. wow. we'll be right back. whole grain, multigrain cheerios! mom, are those my jeans? [ female announcer ] people who choose more whole grain tend to weigh less than those who don't.

multigrain cheerios and you pick the price that works for you. great. whoa, whoa, jamie. watch where you point that thing. [ mocking ] "watch where you point that thing." you point yours, i point mine. okay, l-let's stay calm. [ all shouting ] put it down! be cool! everybody, just be cool! does it price better on the side? no, it just looks cooler. the name your price tool, only from progressive. call or click today. i got you covered. thank you. oh, you're so welcome.

welcome back to "hardball." david petraeus has been headline news all week and for all the wrong reasons. his extramarital affair with his biographer paula broadwell.

today he was on capitol hill talking about a less prurient but more consequential matter, the attack on americans in benghazi. arriving through a secret entrance this morning, the former cia director made his way to the hill for closed meetings with the house and the senate intelligence committees to testify about that september 11th attack, an event he said and always believed was an act of terrorism. according to lawmakers who were in the room. democratic congressman adam schiff from california sits on the intelligence committee and was in the hearing room this morning. congressman, this is so sensitive. is it true or not true that the united nations ambassador susan rice was given the correct known information about what happened in benghazi when she went on those five television shows on sunday a few days after the attack? was she given the accurate, up-to-date information on what had really happened, that it was a terrorist attack? >> she was given the best assessment the intelligence community had at the time.

i asked general petraeus, were the talking points we were given their best intelligence assessment at the time and we were given that late in the day on saturday, late in the afternoon, and he said, yes. these are -- this was the best assessment they could do without disclosing classified information -- >> whoa, whoa, stop right there. stop right there. >> yes. >> he also said according to what i've heard in the testimony today, that he always believed it was a terrorist attack. >> yes, he did. >> how can that be both true? if he gave her the honest testimony to give to the television programs that sunday after the attack, which was a terrorist attack, then she never got told that. he knew it and didn't tell her. >> well, no, you know, i think what the general was saying that when he first briefed the congress he felt, and i think many of us did, you shoot mortars and rpgs at an american diplomatic post, that's an act of terror. the question was not whether he described it as terrorism. the question was it preplanned, who committed the acts and how do we find them and bring them to justice. what the intelligence community

got wrong, and the general acknowledged that this was wrong, is that they thought initially that this was a protest that was either hijacked or got out of control that certainly terrorists and extremists were involved in, but that it began with a protest. it did not begin with a protest. but the key thing in terms of the ambassador is the ambassador was given, as we were, the best assessment at the time as flawed as that was -- >> i am a clear thinker, let's be clear here. did he believe from the very earliest dispatches he got and cables he got on this, did he believe it began as a protest or did he believe it was always a terrorist operation? >> no, he believed that it began as a protest, but he also believed that terrorists and extremists were involved. that's i think consistent with what he said at the time although, you know, at the time he also caveated, as all of the intelligence community did, that these were very initial reports,

that they were going to get a lot more information, and that we needed to be concerned -- >> let's try it again. let's try it again. from what i understand today is he said he didn't give her all the information because he wanted to keep some as classified so he wouldn't give up our sources over there, our contacts. >> chris, first of all, he didn't say he gave her this information. >> well, the cia director signed off on the talking points that she used to go on the tv shows, isn't that right? >> he said he signed off on the talking points that we were given as members of congress. he doesn't know what talking points the ambassador was given, but i asked him that to the degree that what she said on those sunday talk shows tracked the talking points that we were given as members of congress, and it tracked almost identically, was she giving the intelligence community's best assessment at the time that did not divulge classified information? his answer was yes. you know, it was clear from his testimony that, number one, they were wrong about the protest. the ic, the intelligence community was wrong. number two, there was never an

effort to politicize this -- >> that's a loaded word. let's stay away from loaded words. >> from the beginning -- >> well, chris, this is the allegation that's being made. >> that's interpret prative. >> and so to the degree that -- that's interpretative. i want to get to -- >> sure. >> here is the question. mccain and graham, they're out there pushing the case that she misled the american people, she should not be secretary of state or even considered for nomination because she misled on purpose. is there any evidence that she did? >> absolutely not. absolutely not. and, in fact, if ambassador rice departed from what the intelligence community told her and told us was their best assessment, then she's open to legitimate criticism. but she didn't. she took what the intelligence community said, this is our best sense of what happened. >> okay. >> how can you fault her for doing that? >> oh, no, i think she's clean. my problem is with petraeus. from the day he saw the news reports and what she said on the sunday shows, including "meet the press" from our network, from the day he saw how she categorized it as beginning as a protest and somehow being

hijacked by the bad guys with rpgs and heavily armed and all that, from the minute he heard her say that and learned it was not the case, why didn't he correct the record? >> at the time he heard her say that, that is what he thought took place. hedy think it began as a protest. >> when was he disabused of that? when did he learn the full story? >> i think we -- >> when did he learn it? >> i think he learned the full story in the most graphic way when we got the video evidence, and that was not until well after she appeared on those sunday talk shows. now, there are legitimate questions about, you know, why didn't we get that evidence sooner. >> why didn't he give it to us? >> why didn't the general give it to us? >> he knew the country was misled perhaps by accident, i'll take that, by the secretary -- ambassador to the u.n. we were misled. we were all believing what she said. we all thought this -- >> hold on a second, hold on a second here. when you say misled, that is a politicized term. there was nothing deliberate about this. unless you believe that general petraeus and the deputy

director, now acting director morell, and the dni director were all in on some conspiracy. >> no, no. >> -- they were doing their job, and yes, they got it wrong. their initial assessment was wrong. >> congressman, you're missing the point. i'm dealing with the news here as we get it. i don't like rolling disclosure. at some point he got the full story. why didn't he come forward -- why did he have to be dragged into that hearing room today and put before both committees to get the truth? why are we only getting the clarification today? why didn't he as cia director go to the president, the public ought to know what happened. why didn't he do that? >> the intelligence community did put forward improved assessments over time that gave us the clear picture and debunked the idea that there was a protest. you can accuse them of being too slow to do that, and we have asked them exactly these questions why it took so long to get to the truth and get a more accurate picture. they need to put this forward to us in a way that doesn't divulge classified information. but i don't think there's any evidence, i certainly haven't seen any evidence, that general

petraeus or any of the other intelligence community were trying to mislead anyone. they are professional. they were trying to do their job, and we can fault them for getting the initial assessment wrong, but i don't think we can ascribe any kind of malice or intent to deceive. >> when your pants are on fire, someone should tell you your pants are on fire. you shouldn't have to ask are my pants on fire? he is only now getting us the straight skinny. that's my view. i'm going to try to get more information. congressman adam schiff from california, thank you for your straight story. jonathan allen is covering the story from politico. do you see what i'm trying to get at? we want to know why it took so long what now looks to be the straight story. the picture developed like a polaroid film in the old days. it finally developed. it was really always a terrorist attack in the sense the terrorists organized the event. didn't take advantage of it, didn't hijack it, it was their event. >> by definition these guys attack a u.s. embassy, they're terrorists. this is not rocket science, and these are nice glass houses and glass senates the folks in the hill are living on where they

suddenly think it's a crime to go out and use talking points that aren't honest. geez, if that was a crime, 535 members of congress would be in jail for it. i'm listening to this, i have listened to congressman schiff and other members talk to folks who were in the room with david petraeus. no matter how many conversations you have, nothing is clear about the time line of when our intelligence community knew this was a terrorist attack versus some video inspired, protest inspired event and why that wasn't brought forward. obviously the american public has a right to know why an american ambassador and three other americans were killed there and whether there was anything we could do to stop it from happening then, to give them support, or to prevent something like that from happening in the future, and we're not getting those answers, at least not in the public right now. obviously the members of the intelligence committee are getting some kinds of answers but when you talk to them, you get a completely different read on what happened. some folks say petraeus was talking about terrorism on day one. others say he's evolved from this video plot or this video

story to terrorism today. and it's not necessarily partisan. these guys are all over the place. it's like they're in the same room and they have no -- >> that's a good account. he says it was -- we're trying to find what was the event caused by. thank you, jonathan allen. i think it's a great summation. up next, vice president biden's guest appearance on nbc's "parks and recreation." a lighter note coming. this is "hardball," the place for politics. [ heart beating, monitor beeping ]

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back to "hardball." now to the "sideshow." first up, fans of nbc's "parks and recreation" know that amy poehler's character, her name is leslie knope, has interesting criteria for her ideal man. quote, she wants the brains of george clooney and the body of joe biden. well, in last night's episode she got part of that equation. take a look.

>> you must be leslie knope. welcome. welcome. >> my name just came out of your mouth. >> well, yeah, it did. i'm delighted to have you here. on behalf of the president and myself i want -- >> mr. vice president, i am deeply flattered, but there's no way i could take over madam secretary clinton's position. >> i'm confident you could do that job or any other, but the reason -- >> okay, i will. >> well, the reason you're here is i'm told you've done such a great job in your town and in the state of indiana, and i just want to say congratulations for your public service. >> i just want to say thank you. you're very handsome. >> you're very nice but -- >> thank you. >> thank you very much. >> thank you very much. we'll see you tomorrow. >> well -- you will? >> you don't let anything happen to him. do you understand me? he's precious cargo. >> wow. biden's cameo is from last summer. it might have needed a little tweaking if the election turned out differently. don't you think? also, what's the main thing that got in the way for mitt romney this past election? let's look at two of the more blunt assessments.

first karl rove, he thought the drawn out primary process and the debates worked against mitt romney in the general election or in his words from a speech in pennsylvania, mitt romney had what i scientifically call a butt ugly primary. good for you, karl. the election didn't exactly end well for rove either having to answer to all the people who donated to his super pac in the hopes of a romney victory. didn't happen. then there's gop strategist glenn bolger who gave this blunt diagnosis for the loss at the republican governors association conference yesterday. >> what we need to do, one, is we need to convert and get more republicans because if we're going to win independents and get republicans and still lose an election, it's because there's too many damn democrats out there. >> too many, quote, damn democrats and not enough what, damn republicans? that's one way of summing up the arithmetic. you need an expert to do that for you? david letterman also weighed in

with some potential scapegoats on his top ten list. >> number nine, properly functioning voting machines. number six, congressman todd akin's biology teacher. number four, this guy right here. that guy. there's paul ryan. number three, fact checkers. i don't get this one either. number two, the republican party for nominating him. ouch! oh! >> that's good stuff. up next, the fiscal cliff. will the interest groups give president obama room to make a deal? we'll talk with two of them who met with the president today. you're watching "hardball," the place for politics.

our challenge is to make sure that, you know, we are able to cooperate together, work together, find some common ground, make some tough compromises, build some consensus to do the people's business. >> still seems a little tired from the election there. back to "hardball." today president obama met with congressional leaders to kick off talks to avoid that fiscal cliff.

it caps a week in which he's reached out to union leaders, business leaders, congressional leaders to soften the ground for a deal. at exactly is the white house driveway. the congressional leaders, boehner, reid, pelosi, mcconnell, were optimistic but cautious about a deal. here they are at the stakeout. >> to show our seriousness, we have put revenue on the table as long as it's accompanied by significant spending cuts. >> we have the cornerstones of being able to work something out. we're both going to have to give up some of the things that we know are a problem. >> we should have a goal in terms of how much deficit reduction. we should have a deadline before christmas. we should show some milestones of success so that confidence can build. >> we're prepared to put revenue on the table provided we fix the real problem. >> the real problem. you got that? mcconnell is always the tree stump on the lawn when you're trying to cut it. this afternoon the president

held his fourth and final meetings with stakeholders, civic leaders, and members of civic organizations. marc morial is president of the urban league, he was at the afternoon meeting as was aaron smith is cofounder of a group called young invincibles dedicated to ensuring that young people's perspectives are accounted for in policy and economic opportunity, education, and health care issues. thank you both. i want to start with mark more yell. what can we do about this debt problem? it's growing. do you accept the fact it's a serious threat to our country? >> yeah. the deficit is a serious threat. we need a long-term fiscal plan, not a short-term fix. the idea is there has to be shared sacrifice to achieve shared prosperity. >> let me go to aaron with the same question so we're on the same table here. do you believe the national debt as it's grown up around the size of our gdp, we owe as much as we make every year, is that a

dangerous position to be in or not? >> well, i think there are definitely tough choices we have to make about how we're spending our money and being sustainable. i think there are smart ways to make government more efficient. if you look, for example, we spend about $93 billion every year in social services for unemployed young people, young people who are not connected to school. we only spend about $2.5 billion for job training programs. if we invested in the kind of job training and education that young people need, that could grow our economy, and it could reduce some of the government expenditures. >> let's get to cuts. you opened the ball. where would you get $4 trillion in cuts over 10 years? >> who are you asking? >> i'm asking aaron. >> okay. >> cuts. what would you cut to get down to save $4 trillion? >> i think we should start, chris, by talking about what our priorities are. >> no, i know. i'm asking you, where are the cuts? give me some ideas -- big chunks of federal spending. big increases in federal revenue to erase that $4 trillion debt we're trying to get rid of.

>> again, chris, i reject the premise that we should start from the focus of cuts when the real priority for young people is jobs and it's making college more affordable. >> okay. we're talking about debt reduction and the president's problem of avoiding the fiscal cliff, and i got to get back to the mayor. i want to go to ways we can actually do this. i know everybody has to give something. i'm wondering what people are willing to give. mayor, what are the areas that affect the big cities? what the --. >> the big cities are affected by housing, community development investments, education investments, which i might add have already taken cuts. this is what's important is that this is not happening in a vacuum. this is a continuum of looking at with the sequestration and the debt deal where have the cuts already taken place. let me give you an example. community development block grant, title one, head start, workforce investment act, which is job training. these have taken cuts. the most important thing is, one, to sustain, sustain the

middle class tax cuts because to allow them to expire would mean a $3,000 hit for someone who makes $50,000 a year. it's important to understand that revenues and expenditures go hand in hand and any plans got to include all. >> that's right. let me get back to aaron. there's three ways to reduce the debt, increase revenues, reduce expenditures on entitlement programs, or reduce expenditures on regular appropriations. if you were sitting with the president and he's sitting there with a pencil and paper trying to figure out the arithmetic, how could you help him do this thing when he has to do it? >> let's start by putting some of our spending in perspective. the cost of the bush tax cuts for those above 2% is about $80 billion a year. we only spend about $60 billion a year on our whole education system from a federal perspective. so obviously that's something that's got to be on the table. i agree with marc about the point about middle class tax

cuts, things like payroll tax cuts, the aotc, those are critical. there's issues about pell grants which have a shortfall in the future. but i think we need to start with those tax cuts on the upper income earners -- >> would you -- >> 80% of young people support getting rid of those tax cuts. >> would you do anything besides raise taxes on the rich? would you do any cutting of federal spending? >> i think there are ways we could make some of these programs more efficient by investing in the front end in education and training that in the long term can reduce -- >> mayor -- >> -- over a long period of time. >> i want to offer this perspective because in the entire conversation what's been missing is the military where military expenditures for the united states are greater than that of the next ten nations combined. so when you talk about putting everything on the table, domestic discretionary is about 14% to 15% of the budget. you have got to have all appropriations on the table. you have got to have all taxes on the table. you have got to have a comprehensive look.

but our starting point is to sustain those middle class tax cuts, and from a principled position, i believe that those who are most vulnerable shouldn't take the biggest hit, the most substantial hit, and i have confidence that the president is going to take those principles into these negotiations. >> i think we found out something here very important from a progressive point of view. we have to go after the rich tax breaks at the top. they have to lose those things at the top. they've got get back to the clinton era 39.6% rate. it doesn't hurt our economy in the '90s. we had a boom economy. we have to do something about the defense budget as part of the discretionary spending. we've got to do that. and we shouldn't whack the middle class again. they've been whacked for 12 years. thank you, marc morial and aaron. good luck, both of you fellows. as the rich gets rich and the middle class stagnates, a new book asked who stole the american dream. hedrick can smith, one of the great journalists joins us next. this is "hardball," the place for politics. [ male announcer ] if it wasn't for a little thing called the computer,

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we're back. here is what that fight over the fiscal cliff in washington comes down to. the president and the democrats say the wealthy should pay a little more while the republicans say the wealthy already pay too much.

let them keep their money, and they'll create jobs for the rest of us they say. well, a little historic perspective shows why the republican argument is false. and veteran journalist hedrick smith offers that perspective in his new book "who stole the american dream." in the last 40 years, the middle class has been squeezed financially. and sidelined politically. the average worker's salary remained flat and retirement security has largely disappeared. but the pay for ceos has skyrocketed from 40 times the salary of the average company worker in 1980 to 400 times it by 2000 all made possible thanks to powerful corporate interests in washington which shifted the balance of power politically. herick smith joins us now. rick, thank you so much for coming in. i'm going to let you make your message without a lot of q & a. what is the kernel of how people have been squeezed? because they know they've been squeezed. >> everybody tells us the middle class has been squeezed because

of globalization and technology, because of market forces, impersonal forces. when i dug into this and started to look back, what i found out what really happened, back when you were working for tip o'neill as speaker of the house, that was when there was a power shift. louis powell, who was a corporate attorney named to the supreme court by richard nixon, actually wrote a memo and said, we're getting killed. business is getting killed politically by the environmental movement, by the labor movement, by the women's movement, by the consumer movement, ralph nader and those guys. he said, business you have to get to washington, take to high ground. and sure enough, literally within months, the business roundtable was formed, national association of manufacturers moved their headquarters to washington. there were 175 companies when powell wrote his memo, that had

lobbying offices in washington. several years later, there were 2,400, 50,000 people working for business trade. they stuffed the consumer movement. they got deregulation. they got tax cuts, all kinds of things. so the power shift tilted the policy towards business, towards the wealthy. that started in the late '70s literally when you and i were there. at the same time, you had what i call wedge economics in the economy. used to be that the prosperity, the growth of american productivity was shared. middle class had its share along with the owners, along with the shareholders. the productivity of the american workforce doubled from 1945 to 1975. >> i know a lot about this. there's gucci gulch for all the lobbyists tell us how to write tax policy. a lot of businesses draft the bills and draft them for the republicans.

talk how that works. i don't think the public knows some of that. >> they're doing exactly what you're saying. they started out by doing it. the 401(k), it was never intended to be a national retirement plan. it was stuck into the legislation by barbara conable, an upstate new york republican as a favor to xerox and kodak because they had their head offices in his home district. they wanted a tax shelter for retirement payments to executives. that's how it started. they wrote it. it was 401(k) because it's 401 provisions down in the tax code. it was so small, nobody knew it was there. you guys didn't know it was there. >> instead of having a solid pension with a guaranteed annuity coming to you, you have 401(k)s which have shrunk in many cases over the years. >> what you got is hundreds of billions of dollars of expenditures are shifted from the corporate books into the pocketbooks and wallets of ordinary people. it's a disaster. the average 401(k) balance today is $18,000. the median 401(k) balance for people on the verge of retirement after 20 years in the

401(k) is only $85,000. the corporations saved enormous amounts of money, and the people are having to spend a lot more money and not saving enough. >> we have to have you back again and again. this is great stuff. a lot of our progressive viewers don't know the details. thank you so much. they know the squeeze is real. rick smith, the book is called "who stole the american dream." thanks for joining us. when we return, let me finish with whether president obama will reach for greatness in his second term. you're watching "hardball," the place for politics.

let me finish tonight with

let me finish tonight with this. a leader must have a mission. an american leader especially. we are frontier people, happiest most excited most american when we're on a quest. presidents need to know that. great presidents know it because it's who they are, why they set out to lead us in the first place. all our great leaders, washington, lincoln, fdr, kennedy were men with a mission. washington led us into nationhood and defeated the most powerful military force in the world by a brilliant retreat till he caught the british sleeping. then he did something remarkable, setting the model that made him truly great. walking away from power twice. as our first elected leader. he would have been without match until lincoln came along. championing a bloody civil war that are cost us 600,000 countrymen shooting at each other with their blue and gray

uniforms their only cover. he emancipated slaves and through it all began the healing. finally came roosevelt who carried us through the great depression and world war ii yielding us up as the leading country of the modern world by force of human will, getting this country to prevail against the toughest challenges through the strength of his own confidence. one author said he knew who he would win the war just hearing fdr declare it. kennedy a hero in world war ii, led the country through the cuban missile crisis. created the peace corps and took us to the moon. my book on him, jack kennedy elusive hero is just out in paperback. now for barack obama. he's given us health care and a discrimination based on sexual orientation, begun the case for marriage equality, toughened the fight against terrorism. will he now bring us fiscal and immigration policies that